This week, SAP finally introduced Business ByDesign, the company's first software-as-a-service (SaaS) offering geared for small and mid-sized businesses.

CEO Henning Kagermann told press and analysts that Business ByDesign "is the most important announcement I've made in my career. It's a new interface for us," he said. "We enter a new volume business with an on-demand solution."

Business ByDesign will feature a broad range of intuitive ERP and CRM applications, and is powered by SAP's NetWeaver platform. SAP spent two years and invested almost $500 million to launch this direct challenge to Salesforce.com, the clear leader in the hosted, on-demand business application market.

For now, SAP said it plans to charge $149 per month per person with what it called "lower price points for efficiency users." In other words, for limited access to the full on-demand suite, small companies with five or fewer people can use a handful of key applications for $54 a month.

About 20 pilot customers in the U.S. and Germany, including STEMME AG, a utility and sports aircraft manufacturer, and Compass Pharma Services LLC, are using business ByDesign.

The Business ByDemand launch, was twice delayed since SAP began talking it up in December, a sign to some that SAP understands the significance of its first on-demand offering.

Last August, Gartner analyst Dan Sholler said, "A1S is a big bet for SAP. This has to succeed or they will have a whole host of business challenges ahead of them. No one has ever proven they can sell this type of business technology this way. SAP is betting the profitability of the company that it will be able to do it."

Earlier this year, Kagermann said the company plans to grow its total customer base from to 39,000 to more than 100,000 by 2010. Much of that growth, he said, will be tied to the SMB market. That's why the company has invested an estimated $500 million on the A1S launch.

"From the beginning, we designed this for end-to-end processes with a user interface people can tailor depending on their roles and responsibilities," Kagermann said. "I believe what you see is something no one else can offer."

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